Europe's biggest economy shrank last year as Germany struggles with multiple crises

Germany’s economy shrank 0.3% last year as Europe’s former powerhouse struggled with more expensive energy, higher interest rates, a lack of skilled labor and a homegrown budget crisis

FRANKFURT, Germany -- Germany's economy shrank 0.3% last year as Europe's former powerhouse struggled with more expensive energy, higher interest rates, lack of skilled labor and a homegrown budget crisis.

Europe's largest economy has been mired in stagnation since the last months of 2022 amid those multiple challenges. The International Monetary Fund expected Germany to be the worst-performing major developed economy last year, a major turnaround from its place as a model for how to expand when other nations were struggling.

German's economy likely also shrank 0.3% in the fourth quarter after stagnating in the third quarter, the Federal Statistical Office said Monday in an initial rough estimate. Official figures for the last three months of 2023 are expected to be announced Jan. 30.

Meanwhile, there's an ongoing debate about why Germany has stalled. Energy intensive industries must pay higher natural gas prices after losing Russia's cheap supply following its invasion of Ukraine, and a burst of inflation deterred consumers from spending.

Meanwhile, companies complain they can't fill highly skilled jobs, and a global slowdown in manufacturing has been felt in the country's large factory sector.